Wednesday, February 18, 2009

Credit Card Foreign-Exchange Fees Update – Discover and Other Cards

Despite the fact that the Discover credit card does not have as much international presence as does Visa, MasterCard, or America Express (it’s only accepted internationally in Canada, Mexico, the Caribbean, China, and Central America), it was one of the few cards that did not add foreign currency transaction fees when converting purchases made in other currencies. No longer. According to Discover’s terms and conditions, the card will begin charging 2% beginning with billing periods ending after May 1, 2009.

Thus, the only credit cards we know of not charging any forex conversion fees (0%) are Schwab and Capital One. There are several cards from small banks and credit unions that charge 1%, but realistically for most consumers, practically all popular Visas and MasterCards charge 3%, and Amex charges 2.7%. (FlyerGuide Wiki has an overview of credit, debit, and ATM forex fees, but we have not independently verified all their information – it is a user-edited Wiki, after all.)

Technically, the 0% that Schwab and Capital One advertise means that those banks are absorbing the 1% that Visa and MasterCard tack on above the Interbank exchange rate for ALL foreign-currency conversions. Those 3% fees from most banks means that in addition to Visa/MC’s 1%, those banks are adding another 2%.

(This is part 1 of a short 3-part series of updates on international credit card and ATM use. Part 2. Part 3.)